Tenable Support Team
Insolvency Specialists
When your UK business faces financial difficulties, a Company Voluntary Arrangement (CVA) can provide a lifeline. This formal insolvency procedure allows your company to reach an agreement with creditors to repay debts over time while continuing to trade. For many directors, it's the difference between business survival and liquidation.
Key Insight: A CVA typically allows businesses to repay between 25-40% of their unsecured debts over 3-5 years, while maintaining control and continuing operations.
A Company Voluntary Arrangement is a legally binding agreement between a company and its creditors. Supervised by a licensed insolvency practitioner, a CVA proposes a repayment plan that creditors vote on. If approved by 75% of creditors (by debt value), the arrangement becomes binding on all unsecured creditors.
The CVA process typically follows these stages:
Meet with a licensed insolvency practitioner to assess viability and explore all options for your business.
The IP drafts a detailed proposal outlining the repayment plan, typically over 3-5 years, and projected returns to creditors.
Creditors vote on the proposal (75% approval by value required). This usually happens within 28 days of the proposal being filed.
Once approved, the CVA begins. The IP supervises the arrangement, and the company makes agreed monthly or quarterly payments.
After fulfilling all obligations under the CVA, remaining unsecured debts are written off, and the company emerges debt-free.
A CVA works best for viable businesses facing temporary cash flow problems. Here's how to determine if it's suitable for your situation:
The typical costs for setting up and supervising a CVA include:
These fees are built into the CVA proposal and approved by creditors
According to recent insolvency statistics, approximately 60-70% of CVAs successfully complete. Success depends on realistic proposals, creditor support, and the company's ability to maintain trading performance throughout the arrangement period.
Understanding how a CVA compares to other insolvency procedures helps you make the right decision:
| Option | Continue Trading? | Director Control? | Creditor Returns |
|---|---|---|---|
| CVA | Yes | Yes | 25-40% typically |
| Administration | Possible | No (IP controls) | Varies widely |
| Liquidation (CVL) | No | No | 10-20% typically |
| Informal Agreement | Yes | Yes | Not legally binding |
A CVA is registered on the public insolvency register and will appear on credit reports. However, it's generally viewed more favorably than liquidation as it demonstrates a commitment to repaying creditors.
There are no legal restrictions on obtaining credit during a CVA, but lenders may be cautious. The CVA proposal typically requires approval for credit over a certain threshold (usually £500-£1,000).
Missing payments can lead to CVA failure. The supervisor may grant temporary relief if difficulties are short-term, but persistent non-payment typically results in termination, potentially leading to liquidation or administration.
Yes, directors can start new businesses during a CVA as they're not disqualified. However, you must continue fulfilling CVA obligations and any new venture shouldn't jeopardize the existing company's ability to make payments.
A CVA is a serious commitment that requires careful consideration. Before proceeding:
A Company Voluntary Arrangement isn't suitable for every business. Understanding when a CVA is the right solution can save valuable time and resources.
Your company has a fundamentally sound business with potential for profitability once debt burden is reduced.
You can demonstrate consistent cash flow to make monthly CVA payments while covering ongoing trading expenses.
Most of your debt is unsecured (trade creditors, HMRC, credit cards) rather than secured bank loans.
Financial problems stem from temporary issues (pandemic impact, lost client, cash flow timing) rather than terminal decline.
Major creditors are likely to support a CVA proposal, especially if it offers better returns than liquidation.
Directors are committed to the restructuring process and willing to make necessary operational changes.
If your core business model is broken or market conditions have permanently changed, liquidation or administration may be more appropriate.
If projected income cannot cover both CVA contributions and ongoing operational costs, the arrangement will likely fail.
CVAs primarily address unsecured debts. If most debt is secured against assets, other restructuring options may be better.
If a single creditor can block the 75% approval threshold, negotiating directly with them may be more effective.
Determining CVA suitability requires professional assessment. A licensed insolvency practitioner can evaluate your specific circumstances, run creditor return calculations, and advise on the best path forward.
Get Free CVA AssessmentUnderstanding the financial commitment and timeframes involved in a CVA helps you plan effectively and set realistic expectations.
Initial assessment and proposal preparation
Ongoing monitoring and compliance (paid from CVA funds)
Legal notices, filing fees, and administration
Varies based on complexity and debt size
Week 1-2
Initial consultation and viability assessment
Week 3-4
Proposal drafting and creditor communication
Week 5-6
Creditor meeting and voting period
3-5 Years
CVA duration with regular payments to creditors
Fast-Track Options: In urgent situations, CVAs can be implemented in as little as 2-3 weeks with accelerated procedures.
CVA Return
Average pence-in-pound for unsecured creditors
Liquidation Return
Typical return if company liquidates instead
Years Duration
Standard CVA repayment period
You'll need available funds to pay the initial nominee fees before the CVA begins. Some insolvency practitioners offer payment plans or may agree to defer fees until the first CVA payment is received from the company.
A CVA is just one of several insolvency and restructuring options available to UK businesses. Understanding the alternatives helps you make the best decision for your circumstances.
What it is: A court-based process where an administrator takes control to rescue the company, achieve better returns for creditors, or realize assets.
Best for:
Drawbacks:
What it is: The formal closure of an insolvent company, with assets sold to repay creditors before the company is dissolved.
Best for:
Drawbacks:
What it is: Negotiating directly with individual creditors for payment plans without formal insolvency procedures.
Best for:
Drawbacks:
What it is: A court-sanctioned restructuring allowing for flexible debt restructuring, including "cross-class cram down" of dissenting creditors.
Best for:
Drawbacks:
Directors Stay in Control
Unlike administration, you maintain day-to-day management of your business.
Business Continues Trading
Unlike liquidation, you can keep operating and serving customers throughout.
Legally Binding on All
Unlike informal arrangements, dissenting creditors must comply once 75% approve.
Cost-Effective Solution
Lower costs than administration or restructuring plans, more accessible for SMEs.
Every business situation is unique. Our experienced insolvency team can answer your specific questions and provide tailored advice based on your circumstances.
Book Free ConsultationDon't wait until it's too late. Get expert advice from licensed insolvency practitioners who specialize in helping UK businesses like yours navigate financial difficulties.
Initial Consultation
Response Time
Years Experience